Reviewing your business structure before EOFY means stepping back and asking whether the legal structure you use to trade still suits the way your business is actually owned, managed and exposed to risk.
In Australia, the most common structures are sole trader, partnership, company and trust, and each carries different consequences for ownership, liability, governance and registration requirements.
For Victorian business owners, prior to 30 June is a sensible time to do that review.
The lead up to EOFY planning often lines up with budget preparation and strategic planning, succession planning. New investments, downsizing or a proposed sale or change in ownership can be a trigger for restructuring.
The key point is that this should not be treated as a tax-only exercise. A structure review is also about legal risk, compliance, control and the practical mechanics of how the business operates day to day.
What is a business structure review?
A business structure review is a legal and commercial review of whether the entity you use to run the business still fits your current position and your next stage of growth. In practice, that means checking:
- who owns the business
- who controls decisions
- who employs staff
- who holds key contracts and intellectual property
- whether your documents and registers still match the way the business operates.
A structure that worked when the business was small may no longer be the right fit once you have employees, outside capital, valuable intellectual property, family succession plans or a possible sale on the horizon.
Why it matters before 30 June
EOFY is a natural reset point – financials are being finalised, advisers are engaged, and many businesses are making decisions around profit distribution, tax planning, restructuring, dividends, budgets and/or key hires. If your governance framework is outdated or incomplete, it can create real friction and risk at exactly the time you need quick, defensible decisions.
You may still be trading as a sole trader or partnership even though the business now has staff, debt, significant revenue, valuable goodwill or long-term commercial risk. Equally, a company or trust structure set up years ago may no longer suit a simpler business, a family transition or an intended exit.
Business.gov.au identifies business growth, change in ownership, succession planning and downsizing as common reasons to change structure. Those issues do not usually appear all at once, but the lead up to EOFY is often a good time to consider.
Legal considerations before changing structure
Liability and personal exposure
The first question is usually risk. A sole trader structure is simple, but it is still just one individual carrying on the business. A partnership allows two or more people to trade together, but in a general partnership each partner is equally responsible for management and has unlimited liability for the debts and obligations of the business. By contrast, a company is a separate legal entity and can provide stronger separation between the business and the people behind it.
That does not mean moving to a company is an automatic fix. Companies come with more reporting and legal obligations, and directors remain subject to onerous statutory duties. ASIC states that officeholders must act in the company’s best interests, understand the company’s financial position, make sure the company can pay its debts on time, and ensure proper records are kept.
A useful reminder is ASIC v Healey [2011] FCA 717. The Federal Court summary of that case highlights that directors cannot simply rely blindly on others, such as auditors and management, when approving financial reporting. They must understand the company’s financial position and make proper inquiries for themselves.
Governance and decision-making
A good structure is not just about liability. It also needs rules that reflect how decisions are made.
If the business operates through a company, the internal management of that company must be governed by either a constitution or the replaceable rules in the Corporations Act. If the company wants to displace or modify the replaceable rules, it needs a constitution. ASIC also notes that changing or repealing a constitution requires a special resolution.
In addition, a shareholders’ agreement is strongly recommended to supplement the constitution, as it can regulate matters such as control, decision‑making, exit rights and dispute resolution with greater flexibility and confidentiality than the statutory framework alone.If the business operates through a partnership, the partnership agreement should set out how the business will run and deal with issues such as transferred intellectual property and the parties’ obligations.
If the business operates through a trust, the trust deed is the central document but trust structures can be complex and difficult to dissolve or change once established. Many trust deeds are rigid. Amendments may be restricted or prohibited altogether, and any variation must stay within the scope of the original trust to avoid resettlement risks and unexpected tax consequences. Dissolving a trust or transitioning to a different structure (e.g. company ownership) can trigger tax consequences – CGT events, stamp duty, or loss of carried‑forward tax benefits.
Before EOFY, it is worth checking whether the operative documents still match reality. That may include the constitution, shareholder agreement, trust deed, appointer provisions, partnership agreement, delegation arrangements and any succession documents. A structure is far less effective if the paperwork does not match how the business is actually controlled.
Ownership, succession and exit planning
EOFY is also the right time to ask whether the current structure will still work if ownership changes.
If you are planning to bring in an investor, transfer the business to family, separate passive ownership from day-to-day management, or prepare for a sale, the structure needs to accommodate that cleanly. Change in ownership and succession planning as common reasons to restructure.
This is often where older arrangements start to show strain. A structure can look acceptable while everyone is aligned, but become problematic when there is retirement, incapacity, a relationship breakdown between owners, or a need to admit a new stakeholder. Reviewing the structure gives you an opportunity to deal with those issues early, rather than in the middle of a dispute or transaction.
Transition mechanics: ABN, business name and intellectual property
One of the most common mistakes is deciding on a new structure without planning how the transition will actually happen.
In many cases, a restructure is not a simple ‘conversion’. Restructures may need the incorporation of a new company, or establishment of a trust and the dissolution of the partnership and this takes time.
A restructure may necessitate the transfer of a business name, registered trade marks or other registered IP.
The transfer of ownership of a registered trade mark requires a proper assignment process and supporting agreement.
Employees and transfer of business issues
If the employing entity will change, employment law needs to be considered carefully.
Where there is a transfer of business, workplace laws require the new employer to recognise the employee’s service with the old employer for most entitlements. However, some entitlements may be treated differently, including redundancy, annual leave, long service leave, unfair dismissal and notice of termination.
Victorian property and duty issues
For Victorian businesses, property can create a separate legal issue in a restructure.
The Duties Act 2000 (Vic) deals with duty on dutiable property, and the State Revenue Office notes that valuations may be required to determine the unencumbered value of land transferred with a business. So, if your EOFY review involves moving business premises, transferring land between entities, or restructuring ownership around landholding entities, duty needs to be considered before documents are signed.
When to seek legal advice
You should obtain legal advice before EOFY if you are:
- Considering changing your structure e.g. moving from sole trader or partnership to company
- bringing in a new owner, investor or business partner
- changing trustee arrangements
- planning succession, retirement or a business sale
- transferring employees to a new entity
- moving registered IP, goodwill or land between entities
The earlier that advice is obtained, the easier it usually is to align the structure, documentation and implementation steps before 30 June.
How MST Lawyers can help
MST Lawyers’ Corporate and Commercial Advisory team assist with business structuring and restructuring, governance, company advisory and share-related transactions. Savvas Apostolou, Principal in MST’s Corporate and Commercial team, practises in company advisory, business structuring and joint ventures, which aligns directly with this kind of EOFY review.
For clients reviewing structure before 30 June, that support may include:
- reviewing the current entity and ownership arrangement
- advising on whether a new structure is appropriate
- preparing or updating constitutions, agreements and governance documents
- planning the transfer steps for ownership, control and registrations
- working with the client’s accountant to help implement the restructure cleanly.
‘EOFY is a practical time for business owners to review whether their structure still reflects their risk profile, ownership arrangements and long-term plans.’
Key takeaways
- The lead up to EOFY is the right time to test whether your business structure still suits your growth, risk and succession plans.
- A company can improve separation between business liabilities and personal affairs, but directors still carry serious legal obligations.
- A restructure usually involves implementation steps, not just a decision in principle, including ABN, business name and IP changes.
- If employees or Victorian property are involved, extra legal issues can arise and should be addressed early.
- Early legal advice can reduce the risk of an EOFY restructure creating new compliance problems instead of solving existing ones.
General information only. This draft is not legal advice.
